Digital Innovation in Finance for the Arts

Finance and Art

Crowdfunding and other fundraising models in the Arts

Crowdfunding has been a disruptive force in the creative industries. Not so much a technological phenomenon, but a social one, Molly Bishop considers the future of fundraising in the arts.

Most creative SMEs have little room to manoeuvre financially. Looking to secure traditional risk-averse bank loans or ever-dwindling Arts Council grants can be akin to sitting between a rock and a hard place.

Crowdfunding, the process of gaining investment from an interested group through an online campaign, offers a point of disruption to this norm. Projects deemed too risky for banks which often turn to philanthropist goodwill, can now pursue a new route of attracting investment. Aside from donation and reward based channels, equity crowdfunding offers an attractive third way to investors which will change the way that arts practitioners pitch and finance themselves and their work. Crowdfunding is the start-up for all other start-ups.

Why Crowdfunding became so Popular

The influences contributing to this ever growing trend are multiple. ‘Push’ factors include government cuts to public arts funding and dissatisfaction with the banks’ hefty loans processes. In a more positive light, creative companies are also being pulled towards crowdfunding. Low overheads and transparency facilitated by swift FSA regulation and the responsive technology on funding platforms have landed the UK a status of ‘international hub’ for equity crowdfunding. Seedrs, Crowdcube, Phundee, Investing Zone, Syndicate Room, and others are all proclaiming their successes and the growth of a rising trend.

The technology behind online crowdfunding is not revolutionary. The internet and the interconnectivity it provides have been around for decades. JustGiving have been using the internet to allow a global audience to finance individual projects for over ten years. We’ve seen Amazon and Ebay turn retail on its head. Ebooks have caused a sea-change in publishing. What equity crowdfunding represents a new process and a new model on an existing resource.

The new platforms are entrepreneurial of course, but they are also intrepreneurial: they work within a sector to improve and redirect resources. At heart Crowdfunding is a social and financial phenomenon not a technological one. However peer to peer giving has never before had such a significant role in commercial business and it is the imaginative use of online interconnectivity that has enabled this. It shows us that change is not reliant on new technology and cutting edge research, but a change of attitude and insight to take a different approach.

Future of Fundraising in the Arts and Cultural Industries

This change of attitude is having a ripple effect across the face of arts funding. It has had wide effects on the behaviours of all the players involved. New investors are stepping up to consider arts and creative projects as financially viable and old investors are becoming re-invigorated. The possibility for significant change in the way the arts is funded is tangible.

The creative industries have an opportunity to draw on the unique nature of their product. Arts investors may be after a return but they are also out to be entertained- a hybrid or equity-plus-rewards model offers an exciting chance for this niche investor attitude. Perhaps most exciting is the opportunity for matched funding by traditional grant funds based on the success of equity crowdfunding bids. An innovation in the way a technology is used may well bring about a sea change in the way a whole industry finances itself. Since the bottom line is everything, this is a pretty big deal.


Written By:

Molly Bishop

Molly Bishop is the Enterprise Consultant at University of Bristol, where she acts as the liaison between the University’s Enterprise Managers and the student body. She volunteers in local arts spaces and charities and is committed to social engagement with creativity and entrepreneurship.

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